Fears Grow over EU Summit Outcome

(Reuters) - World stocks eased and the euro fell on Thursday after a euro zone official added to signs playing down expectations for what may emerge from two crucial days of meetings aimed at quelling the bloc's debt crisis.

The official told Reuters countries are likely to agree to lend 150 billion euros to the IMF via bilateral loans from their central banks - read by markets as a low number - and said a proposal to give the euro zone's permanent bailout fund a banking license was off the table.

That came on top of warnings from a German official playing down hopes for a comprehensive deal on Friday that cut short an eight-day rally on Wednesday.

Stock, debt and money markets in Europe were all trading in tight ranges on Thursday but the cost of insuring Italian and Spanish debt against default rose on uncertainties over whether politicians will do enough to stem the crisis.

U.S. stocks looked set to open moderately lower.

What will be crucial for markets is whether the summit will deliver enough for the ECB to act (to support euro zone governments' borrowing). So even if there is a lift in the euro post-ECB, most will be wary going into the summit, said George Saravelos, G10 FX strategist at Deutsche Bank.

France and Germany planned to lobby conservative European leaders to back a plan to defuse a crisis now stretching back more than two years. Paris and Berlin need to win backing quickly for their plan to amend the European Union's Lisbon treaty to toughen budget discipline, if they are to have it ready as they hope by March.

I have the feeling that euro zone politicians know what is at stake, Carsten Brzeski, senior economist for ING, told Reuters Insider.

I think they would try to do really everything to get their act together and to come off with some tangible results at the end of this summit, he said.

ECB EYED

The ECB is also expected to unveil a new package of bank aid on Thursday, with investors looking for any hint it will intensify its buying of bonds issued by the euro zone economies struggling with high debt, setting the stage for a critical euro zone summit that starts with a dinner on Thursday night.

A Reuters survey of 73 analysts showed a 60-percent chance the ECB will cut rates by 25 basis points for the second month running, back to the record low of 1.0 percent it reached during the financial crisis.

The euro which had been trading in a tight range around $1.3405, fell to $1.33980 on the latest developments.

The euro had risen in the Asian session after the Nikkei business daily said the G20 was preparing a $600 billion lending facility for the IMF to help Europe, but the effect faded after it was denied by G20 and IMF officials.

The MSCI All-Country World Index .MIWD00000PUS had risen nearly 9 percent since the start of last week, mainly on hopes that the threat of financial meltdown would force European leaders to come up with a coherent plan to save the euro.

The Bank of England is expected to hold interest rates unchanged at 0.5 percent and reaffirm a commitment to loose policy on Thursday as the euro zone debt crisis threatens to tip Britain back into recession.

Underlining the case for an ECB rate cut, the Bank of France said French growth would grind to a halt in the final quarter of the year after the economy, the euro zone's second-biggest, grew 0.4 percent in the previous quarter.